Readers hoping to buy Ningbo Sunrise Elc Technology Co.,Ltd (SZSE:002937) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Ningbo Sunrise Elc TechnologyLtd investors that purchase the stock on or after the 6th of June will not receive the dividend, which will be paid on the 6th of June.

The company's next dividend payment will be CN¥0.30 per share, on the back of last year when the company paid a total of CN¥0.60 to shareholders. Based on the last year's worth of payments, Ningbo Sunrise Elc TechnologyLtd stock has a trailing yield of around 2.8% on the current share price of CN¥21.68. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Ningbo Sunrise Elc TechnologyLtd's payout ratio is modest, at just 41% of profit. A useful secondary check can be to evaluate whether Ningbo Sunrise Elc TechnologyLtd generated enough free cash flow to afford its dividend. It paid out more than half (59%) of its free cash flow in the past year, which is within an average range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Ningbo Sunrise Elc TechnologyLtd's earnings per share have risen 16% per annum over the last five years. Ningbo Sunrise Elc TechnologyLtd has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ningbo Sunrise Elc TechnologyLtd has delivered an average of 26% per year annual increase in its dividend, based on the past five years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Has Ningbo Sunrise Elc TechnologyLtd got what it takes to maintain its dividend payments? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Ningbo Sunrise Elc TechnologyLtd has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Ningbo Sunrise Elc TechnologyLtd you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.